The credit score is similar to a black hole in out-space when it comes to understanding them. The entire credit scoring system and credit industry is very much a lawless place with a rule book that is written by the credit industry and then locked away in a deep, dark, secret vault.
Here is why the credit scroing system is so difficult to understand and why so many people are left confused about their credit score – even when they actually know what their credit score is….
Every single financial lending/credit institution has its very own credit scoring method which they devise themselves and do NOT disclose to the public. It’s like a secret code.
With their own credit scoring system in place, they then set a minimum number of points that you must reach in order for then to accept your application.
And here is where it all gets very complex because each lender chooses how many points it will award your application or deduct from your application for each peice of information that you supply. For example:
You are awarded points based on how long you have lived at your current address and generally, the longer you have lived at the same addres, the more points you will be awarded (upto the maximum for that part of the application).
But what is not revealed is how many points you are awarded based on how long you have lived at your present address.
And this is applied throughout your application – How long you have been with your current employer, our past employer. How many credit cards to you have, how long have you been with your bank etc etc.
For each section of your application, the lender awards you a certain amount of points until they reach the total at the end. It is this total that will dictate whether your application is successful or not.
But you have no way of knowing, as you fill in the application form, if you are going to be accepted or declined. So although you may know your credit score, it doesn’t actually mean too much at all as each financial lending institution will score your credit application based on THEIR credit scoring system.
Your credit score just gives you an idea how good your credit rating is in general and does not serve as a way of knowing that you will be accepted for credit every time you apply.